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charged for the same or similar services in independent
transactions with or between unrelated parties under similar
circumstances considering all relevant facts." Sec. 1.482-
2(b)(3), Income Tax Regs. Unless the services are an integral
part of the business activity of either the entity rendering the
services or the entity receiving them, the arm's-length charge is
deemed to be equal to all the costs or deductions incurred which
are directly or indirectly related to the services performed.
The taxpayer, however, may establish a more appropriate charge.
See sec. 1.482-2(b)(3) and (4), Income Tax Regs. The costs or
deductions incurred in rendering the services, however, are not
deemed equal to the arm's-length charge for services which are an
integral part of the business activity of either the member
rendering the services or the member receiving the benefit of the
services. See sec. 1.482-2(b)(7), Income Tax Regs.
Services are considered an integral part of the business
activity of a member of a group of controlled entities if: (i)
Either the renderer or the recipient is engaged in the trade or
business of rendering similar services to one or more unrelated
parties; (ii) the renderer renders services to one or more
related parties as one of its principal activities; (iii) the
renderer is peculiarly capable of rendering the services and such
services are a principal element in the operations of the
recipient; or (iv) the recipient has received the benefit of a
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